House Finance Division 2 shifts Education Trust Fund allocations, increases special education funding and trims UNH support

House Finance Division 2 presented a package of education‑sector changes and related revenue moves intended to balance the biennial budget while protecting core adequacy funding for local public schools.

What the division proposed: the package (1) moved certain line items that had previously been funded from the Education Trust Fund (ETF) into the general fund while keeping adequacy grant amounts essentially unchanged for FY2026; (2) altered the revenue split that feeds ETF (shifting a portion of some tax lines between general fund and ETF so ETF still supports the remaining ETF items); (3) increased the special education per‑pupil weight to $3,140 for FY2027; (4) adjusted charter school and dual‑enrollment funding mechanics; (5) redirected about $15,000,000 in annually recurring “unique” Fidelity 529 program funds to partially supplant UNH general fund support (the division reduced UNH general‑fund support and applied the Fidelity funds to the UNH line); and (6) set a $137,000,000 flat distribution from meals and rooms tax to municipalities for the biennium rather than continuing a percentage formulation.

Why it matters: education funding is the largest single portion of the state operating budget. Division 2’s moves change both where the money originates and how it is disbursed. The largest practical shifts are (a) the funding source reallocation (ETF ↔ general fund) and (b) the $25,000,000 annual reduction to University System of New Hampshire general fund support, offset in part by unique Fidelity funds. Together the changes will affect local school budgets, college system revenues, and state revenue flexibility.

Specifics members debated: - Education Trust Fund reallocation: Division 2 moved multiple small accounts back to the general fund while setting a modified distribution from BPT/BET/transfer taxes (70% to general fund / 30% to ETF in the division package) so ETF can continue to fund the items that remain. Minority members warned the change reduces legal and practical protection of ETF dollars over the long term. The division argued the change preserves ETA payments for adequacy while creating operating flexibility in a tight revenue year. - Special education: The division set the FY2027 special education per‑pupil figure at $3,140 (up from $2,100), a change that increases total adequacy spending in FY2027 by roughly $28,000,000 compared with the governor’s original numbers. - University funding and unique Fidelity funds: The package reduced general‑fund support to the University System of New Hampshire and applied roughly $15,000,000 yearly in Fidelity‑related “unique funds” to UNH, lowering the net direct general‑fund appropriation. Division members said the change spreads available general funds to other urgent priorities but acknowledged university officials could experience operational stress; several lawmakers requested a system budget briefing. - Education Freedom Accounts (EFAs): Division 2 included changes expanding eligibility (increase in the FY2026 cap from 350% to 400% of federal poverty in FY2026 and removing the income cap in FY2027). The division used a Josiah Bartlett Center estimate of potential enrollment/price impacts; members warned of large fiscal uncertainty (estimates of cost impacts cited in committee discussion ranged widely).

Process and outcome: Division 2 advanced its package to the full committee after debate and roll‑call consideration. Members emphasized the package was an interlocking set of revenue and expenditure moves intended to preserve the constitutionally required adequacy grants while freeing general funds to balance other pressing needs.

What’s next: Several members asked for follow‑up briefings from the University System and from the Education Department on modeling EFA expansion and the long‑term effects of ETF reallocations. The package was transmitted to the broader House Finance Committee for consideration.